HD Footage looks blurry in SD Sequence

So this may be a very simple question, or it may not.  I'm almost entirely switched over from Final Cut Pro to Adobe Premiere Pro CS5.  So far there are some really amazing things about Premiere that I'm very impressed with.
I have run into an issue where I shot some footage for another company in AVCHD 1080p 30fps (footage is inside a 60i container) and when I drop it into an NTSC 4:3 sequence and zoom in to about 135 percent it looks extremely blurry (the client requires the final cut to be NTSC 4:3).  In Final Cut Pro, I've shot in 1080 HD plenty of times then just dropped it into an SD sequence, adjusted the scale and position, and was able to work in the SD sequence from that point on.  While the end result would not look quite as sharp as the original 1080 HD footage, it still looked quite good (better than much of my footage shot in SD).  Since the HD footage is shot in a much higher resolution than 720x480 I was able to zoom into close to 150 percent without seeing any significant fuzziness in the image.  So now that I'm zooming in about 135 percent, I'm very surprised to see the amount of blurriness that I'm seeing.  I've tried rendering the footage and exporting the footage and i still get the same blurriness. 
Below are some still images I exported from the footage
Above is a still image from the original HD footage in a 1080 HD sequence
This second image is from the HD footage in a 720x480 sequence at 100% scale
This third image is from the HD footage in a 720x480 sequence at 135% scale
As you can see, the third image looks very blurry.  When exporting from FCP the image would generally be at least as sharp as the second image even when at 135% or 150% scale.
Is there a better way to edit HD footage in an SD sequence in order to not lose so much detail?  Should I nest the footage and then drag the nested HD sequence into the SD sequence?  Or is there something else going on that I'm just not aware of?
Thanks so much for your help!
Mike S.
Adobe Premiere Pro CS5, Macbook Pro 15", Intel Core Duo i7 2.2 GHz Quad Core, 8 GB RAM, 24" HP 2509b Monitor, M-Audio Fast Track to Yamaha MSP3 4" Powered Monitor Speakers

Hi Mike,
When you initially drop the HD clip into the SD sequence, are you seeing the whole image in the frame, or just a blown up middle part? If you are enabling "Auto Scale to Frame Size" in Preferences, or manually on the clip BEFORE scaling, this could be the issue. Right-click on the clip and make sure "Scale to Frame" is off, then scale using Motion effect to suit your needs. This way, you are starting out with all the HD pixels available, so when you scale up, the picture should remain sharp as you are viewing a subset of the larger HD image in your SD "window".
Looking at your sample images again, I think that is the case - it is being scaled down to SD, then blown up again using Scale, and that is where the loss is coming from.
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